The Center for Economic Justice says LTC benefits could fit nicely with other benefits. Bonnie Burns worries about complexity. (Image: Shutterstock)

Members of a body that’s trying to develop better ways to help people pay for long-term care are struggling with how to think about products that combine long-term care benefits with something else.

U.S. insurers already sell annuities that offer long-term care benefits, and life insurance policies that offer long-term care benefits, or similar benefits.

The Long Term Care Innovations Subgroup, a panel of regulators at the National Association of Insurance Commissioners, has talked about the possibility of encouraging the creation of other types of hybrids. The subgroup has suggested that an insurance policy could protect consumers against death or disability when they are young, then turn into long-term care insurance once the insureds are old.

(Related on ThinkAdvisor: Health-LTC multi-tools)

The subgroup has spent months holding conference calls and in-person meetings with long-term care insurance specialists, including representatives from actuarial firms, insurance agent groups and long-term care insurers.

The subgroup included several hybrid-related proposals in a federal policy options document.

  • Create retirement plan-LTC hybrids, by helping consumers use individual or employer-sponsored retirement plan cash to pay for long-term care insurance.

  • Encourage the development and sale of products that bolt long-term care benefits onto some other type of insurance chassis, such as term life or disability insurance.

  • Set up some kind of Medicare-LTC hybrid program, by making long-term care insurance available through a new “Medicare Part E” program, or through the existing Medicare supplemental insurance program.

Here’s a look at what some of the commenters said about the LTC hybrid proposals.

1. Center for Economic Justice

The Center for Economic Justice is one of dozens of groups that receive funding from the NAIC to speak for consumers in NAIC.

The center makes a point of trying to speak to low-income and middle-income consumers. In comments on the LTC policy options document, the center blasted any efforts to save stand-alone long-term care insurance, or any LTC planning tax breaks that might help high-income people more than low-income people.

“Stand-alone LTCI is a trouble product,” the center says.

Policymakers should emphasize the idea of providing LTC financing through public insurance, the center said.

The center welcomes the idea of policymakers promoting private LTC financing through private hybrid insurance products. The center says it would even be open to the idea of the government offering tax incentives to purchasers of hybrid products.

The center also supports the idea of finding a way to add a home care benefit to traditional Medicare, to Medicare supplement insurance, or to Medicare Advantage plans.

2. America’s Health Insurance Plans, American Council of Life Insurers

AHIP and the ACLI teamed up to submit a joint comment. They strongly support the idea of promoting the sale of new types of hybrids, but they are somewhat cooler toward hybrids than the Center for Economic Justice.

AHIP and the ACLI back the idea of building LTC benefits into disability insurance or term life insurance.

They crossed out the federal policy options provision calling for LTC benefits to be included within Medicare supplement policies.

Medicare supplement policies normally help consumers pay the out-of-pocket costs for items that Medicare does cover, the groups say.

“Given the nature of the product, which reacts to the coverage and structure of Medicare, we do not believe that Medicare supplement policies would be an appropriate avenue for LTC inclusion,” the groups write.

3. John O’Leary, Former Insurance Marketing Exec

John O’Leary was once a long-term care insurance marketing executive at Genworth Financial. He’s now a marketing consultant. One of his goals is to develop a term life product that would turn into long-term care insurance when the insured turned 65.

O’Leary talks in his comments about the nuts and bolts of creating hybrids.

He says, for example, that, if Congress wants insurers to offer disability-LTC or term life-LTC hybrids, then it needs to add those products to the tax laws that govern accelerated life insurance death benefits.

He says any policy recommendations about Medicare-LTC hybrids should be general in nature, to reflect the fact that any LTC benefits might come through a Medicare Advantage plan, rather than through a Medicare supplement insurance policy.

4. John Cutler, Federal LTCI Program Architect

John Cutler, the consultant who developed the Federal Long Term Care Insurance Program for federal employees and dependents, says policymakers have to be realistic about what life-LTC hybrids can do.

Policymakers should think harder about helping consumers tap their existing life insurance death benefits to pay for long-term care, and somewhat less about encouraging relatively young consumers to buy life-LTC hybrids.

“Even if sales are much greater than expected, it solves the problem 30 years from now,” Cutler said. “Focusing on how to best access existing life coverage is an important and immediate way to address this need.”

5. Bonnie Burns, Consumer Advocate Educator

Bonnie Burns is a consumer advocate educator at California Health Advocates. On many issues, such as the need to keep any long-term care insurance tax breaks from going mainly to high-income people, she tends to agree with the Center for Economic Justice.

Burns takes a much different approach from the center on LTC hybrids.

“Combining multiple benefits within a single product will add complexity to the purchasing decision and require extensive disclosures to ensure consumer understanding,” Burns writes in a comment. “Multiple benefits would also require careful and ongoing regulatory review and oversight of sale and marketing, product designs, and pricing.”

Burns also questions whether adding long-term care coverage to Medicare supplement insurance would be good either for the LTC coverage or the Medicare supplement insurance.

Combining the products “would add extra cost to the Medigap premium, putting both coverages at risk,” Burns writes. “We would not support making Medigap more expensive by adding an additional expensive benefit.”

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